Fibre potential waits for focus

While we wait for super-fast broadband, wireless hotspot providers have room to grow. Photo / Richard Robinson

Many, many years ago, before the iPhone was a gleam in the eye of Steve Jobs' accountant, some industrious types blew optical fibre down the network of gas pipes laid down by the Victorians under the streets of central Auckland.

They were the clever ones, in that they spent less money than some of the other fellows around at the time, who insisted on digging up the same streets to lay their fibre into the ancient mud.

So we have the technology. We have competition, in that there are multiple, supposedly competing networks. What we don't have are customers. Not one has yet worked out how to create a business selling this capacity to all and sundry.

Of course the larger corporates are able to get what they need, but even savvy internet companies have struggled to get someone to retail them a nice fat pipe with a decent upload speed.

So Aucklanders can be forgiven if they don't get all excited about the prospect of ultra-fast broadband.

It's in the same category as the proletarian revolution - just around the corner, where it's always been.

Still, the good news to come out of Communications Minister Steven Joyce's speech to last week's Telecommunications and ICT summit was that the Treasury dries lost out to the pragmatists in the Ministry for Economic Development.

The debate is what's known as layer one versus layer two.

If your eyes glaze over, be assured it's the sort of conflict that has people seeking psychological counselling, if not going back to count the angels on the head of a pin.

Remember, this is about the companies that the Government will co-invest with to build ultra-fast broadband networks in up to 33 regions.

The purists wanted the local fibre companies (LFCs) to sell layer one services - that is, dark or unlit fibre - which other companies would then rent from them to create retail service offerings.

The MED believe there are not a lot of buyers for dark fibre, and it's better to allow the LFCs to add what are called layer two services, so buyers are more likely to want to take the product.

Joyce is proposing the LFCs do both - go up the stack as far as is required to find enough customers to pay back their investment, but also require them to sell dark fibre when asked.

That means telecommunications companies, IT service companies, internet service providers and even some major users can pick the level of access that suits them.

Since in many areas the fibre provider may have a natural monopoly, that's important to give customers a real choice. Since the innovation will come from how you light the fibre, the choice of how to do that can't be left to the LFC.

In some ways it's a repeat of the debate over local loop unbundling. Giving outsiders access to Telecom's copper network may not have created everything that was expected of it (and it may have been subverted anyway by technology shifts), but it did create a viable wholesale market.

By shifting the boundary between infrastructure provision and service provision, the incentives to invest change. Going on past performance, the Government may have to offer more incentives to its LFC partners. An indication of how hard this stuff can be is the experience of Bosco Connect, which retails electricity to thousands of Auckland apartment dwellers.

Founder Toby Warren says when it started four years ago it was offering a full-service package that included phone and internet service.

It's no longer pushing that side of the business. The high turnover of apartment dwellers and the up-front cost of establishing internet connections means it's hard to make such a service profitable.

That's the CBD. We still haven't got to the pitched battles on the streets of our suburbs between the roading engineers and the telecommunications engineers.

While we're waiting for that pipe coming out of the wall with its abundance of content, whatever that might be, there's plenty of room for people to be making businesses from what happens now.

Wireless hotspot provider Tomizone is enjoying healthy growth, and chief operating officer Tony Wickstead says it's also noticing the number of smartphones and iPads accessing its networks.

It's also building out its network through alliances with similar companies around the world, such as iPass and Bongo.

Tomizone's newest partner is Brazil-based Vex, which means customers travelling in Latin America can access Wi-fi hotspots on their home account.

adamgifford5@gmail.com